Deal of the week: National Express

There can’t have been many teams of lawyers that had a busier week than the one at Ashurst looking after National Express.

The embattled transport group began the week with what it says is an unwanted bid approach and ended it being stripped of its trophy asset and threatened with further action. In between, there is a £1.2 billion debt pile to refinance, a chief executive to replace, a falling share price and talk of a rights issue or disposals.

Not all of National Express’ problems are legal — but most will require some input from Steven Fox (corporate) and Lee Mcdonald (transport), the Ashurst partners leading a team of legal advisers dedicated to the company.

While National Express and its bankers concentrate on its balance sheet the Ashurst team, which has advised the company for several years, is likely to be in heavy demand elsewhere. Although Monday’s preliminary all-share offer from rival First Group was rejected out of hand by the National Express board, few expect the suitor to walk away leaving a defence strategy high on the corporate agenda.

Fox’s corporate advisers will also need to steer National Express through the potential minefield of a recapitalisation during an offer period. Since First Group has not formally walked away, National Express is technically in an offer period under the UK takeover rules. This means it must be extremely careful not to give any information to, for instance, a large investor it may be tapping to back a rights issue, without giving the same information to the market immediately. Recapitalising a company during an offer period is by no means impossible but it’s another thing to keep National Express’ advisers on alert.

With much of the negotiations around the loss of the East Coast Mainline franchise already complete, legal attention will turn to the status of National Express’ two remaining franchises: East Anglia and c2c. Lord Adonis, the Transport Minister, has threatened to them away in a move that would probably lead to substantial litigation. 

National Express believes the Government has no legal right to strip its contracts, chiefly because the remaining franchises are held, like the East Coast mainline was, by subsidiaries of parent group National Express. Forcing one or both of those legally independent subsidiaries to surrender their franchises because of the actions of another subsidiary (the one that ran the East Coast Mainline) would possibly be unlawful. Lord Adonis disagrees, setting the stage for the courts to decide.

Ashurst is likely the busiest but recent events at National Express have created a role for at least one other law firm: Slaughter and May is advising First Group on its bid. The Department for Transport is relying on its in-house lawyers. For now.

Comments

[Thinker]

Profits are privatised (e.g. paid out to private shareholders)
but losses are nationalised / sozialised (e.g. the taxpayer has to take over the bill after the private shareholders bled the company dry by NOT investing the profits and by NOT properly investing in the railroad infrastructure.

Let's face it: not all privatisations are good. Keeping transport infrastructure under state control doesn't seem to be such a bad idea afterall.